It appears that the big buyers of Bitcoin have taken their foot off the gas.
For much of the past year or so, it has felt like there has always been a tailwind behind Bitcoin’s price. ETFs siphoned off coins, stablecoin balances continued to grow, and traders were willing to use insane levels of leverage to bet on further upside. NYDIG calls these the cycle’s “demand engines” in its latest report. The company claimed that some of these dynamics have reversed direction. ETFs are seeing net outflows, stablecoin infrastructure is stalling, and futures markets are becoming cautious.
Just reading the headline sounds pretty creepy. Unfortunately, as always, the truth is always somewhere in the middle. We’ll discuss each of these engines, continue to focus on the inflows and outflows of dollars, and end with practical questions of interest to everyone. If the big machines are indeed slowing down, will they disrupt the bull market or slow it down?
When the ETF hose stops exploding
The easiest engine to understand is the ETF pipe. Since its inception in January 2024, the US Spot Bitcoin ETF has generated tens of billions of dollars in net inflows. That money came from advisors, hedge funds, family offices, and individual investors who chose stock tickers as their preferred method of Bitcoin exposure. The important detail is that they were net buyers almost every week for most of the year.
However, that pattern broke last month. For several days in November, the ETF complex recorded large redemptions, including the largest outflow since its inception. Several funds that were reliable buyers (think BlackRock) turned net sellers. If you were looking at one day’s worth of data, it might have felt like the entire ETF market had exploded.
Of course, the long-term perspective is less dramatic, but still important. Cumulative flows are still very positive and all funds still hold huge amounts of Bitcoin. What has changed is the direction of margin. Instead of a steady influx of new cash, some investors are locking in profits, reducing exposure or moving on to other trades. This means there is no mechanical buyer sitting below the spot price all the time.
Much of that action has to do with how investors are currently hedging and managing risk. Once regulators allowed much higher position limits for ETF options (from 25,000 to 250,000 contracts), financial institutions could now run covered call strategies and other overlays on top of their ETF holdings. This gave me more ways to adjust my risk without selling stocks, but it also depleted some of my pure “buy and hold at any price” energy. As prices soared toward the ceiling, some investors capped the upside to generate income. When prices rolled over, other companies used the same options market to hedge instead of adding spot.
The second engine is in stablecoins. If ETFs are Wall Street-friendly funnels into Bitcoin, stablecoins are crypto-native piles of cash that reside within the system. Growing USDT, USDC, and peers usually means more fresh funds are arriving or at least being held on exchanges ready for deployment. For most of last year, Bitcoin was gaining significant legs alongside the growth of its stablecoin base.
The pattern has become unstable as the total supply of stablecoins has stopped increasing and even decreased slightly over the past month. Trackers disagree about the exact amount, but it is abundantly clear that it is decreasing. Some of that can come down to simple risk mitigation. Traders withdraw funds from exchanges, funds circulate into US Treasuries, and small tokens lose market share. But some of them teeth Substantial withdrawal of capital from the market.
What we see here is simple. The pool of digital dollars chasing Bitcoin is no longer growing. While that doesn’t automatically push prices down, it does mean that every rally has to be funded from a more or less fixed pot. There is now less “new money” floating around exchanges that can instantly flood into BTC when sentiment changes.
A third engine is included in the derivative. The funding rate on perpetual futures is the fee that traders pay to match these contracts to the spot price. When funding is very positive, it usually means that many traders have long leverage and are paying to stay that way. When funding goes negative, shorts end up paying longs, and the market becomes biased towards downside bets. The “norm” for regulated futures trading like CME is simply the gap between futures and spot. Large positive evidence typically indicates strong demand to go long with leverage.
NYDIG notes that both of these gauges are cold. Financing for offshore perpetual bonds sometimes turns negative. CME futures premiums fell. Open interest has decreased compared to its peak. This indicates that many of the leveraged longs were washed away in the recent drawdown and are in no hurry to return. Traders are becoming more cautious, and some are willing to pay for downside protection instead of upside exposure.
This is important for two reasons. First, leveraged buyers are often the marginal force that moves a healthy uptrend into a vertical sell-off. When you’re on the losing side, or on the sidelines, movement tends to be slow, choppy, and significantly less interesting for those looking for instant all-time highs. Second, as leverage increases in one direction, both gains and crashes can be amplified. Low leverage markets can still move significantly, but sudden air pockets caused by liquidations are less likely to occur.
So if ETFs are out, stablecoins are flat, and derivatives traders are cautious, who will be on the other side of this decline?
This is where the picture becomes more subtle. On-chain data and exchange metrics suggest that some long-term holders have taken advantage of the recent volatility to profit. The coin, which had been dormant for a long time, began to move again. At the same time, there are signs that new wallets and smaller buyers are quietly gathering. Some address clusters that you rarely use have also been added to your balance. And retail flows on some of the major exchanges still lean toward net buying on the worst days.
That is the core of NYDIG’s Reversal, Not Ruin framework. The most visible and headline-friendly demand engine shifted in the opposite direction as prices cooled. Underneath, there is still a slow transition from the old, wealthy groups to the new ones. This flow of funds is less choppy and mechanical than during the ETF boom, making the market feel tougher for late arrivals. However, this is not the same as capital disappearing completely.
What this actually means for you
First of all, easy mode is pretty much obsolete for now. For most of the year, ETF inflows and stablecoin balance growth acted like a one-way escalator. You didn’t need to know much about futures funding or option limits to understand why prices keep going up as new money keeps arriving. The underlying bids faded and turned into net selling within a few weeks, making the drawdown feel heavier and making it harder to sustain gains.
Second, a slowdown in the demand engine does not automatically end the cycle. Bitcoin’s long-term issues still revolve around fixed supply, growth of institutional rails, and steady expansion of where Bitcoin can sit on balance sheets, and those structures remain in place.
What changes is the path from here to the next height. Markets will start trading based on positioning and pockets of liquidity instead of a straight line driven by one giant narrative. ETF flows may fluctuate between red and green, stablecoins may bounce around plateaus rather than rising, and derivatives markets may spend more time in neutrality. In such environments, patience is rewarded more than bravery.
Finally, if we zoom out, we can see that demand engine reversals are part of every cycle’s breathing. A large inflow primes the hyperextension, but subsequent outflow and cooling effects force a reset. New buyers come at lower prices, usually quieter, and without much fanfare. NYDIG’s argument is that Bitcoin is somewhere in its reset phase and the data supports that view.
The engine that powered the first leg of the bull’s run has slowed down and some are running backwards, but that doesn’t mean the machine is broken. This means that the next leg will depend more on whether investors still want to own this after the easy part is over than on Autopipe.
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